diff --git a/clang/docs/ReleaseNotes.rst b/clang/docs/ReleaseNotes.rst
index e6e33e7a9a280..20d950cac9579 100644
--- a/clang/docs/ReleaseNotes.rst
+++ b/clang/docs/ReleaseNotes.rst
@@ -429,6 +429,8 @@ Bug Fixes in This Version
 - Fixed a failed assertion with empty filename arguments in ``__has_embed``. (#GH159898)
 - Fixed a failed assertion with empty filename in ``#embed`` directive. (#GH162951)
 - Fixed a crash triggered by unterminated ``__has_embed``. (#GH162953)
+- Fixed a wrong diagnostic about a local variable inside a lambda in unevaluated
+  context needs capture. (#GH163837)
 
 Bug Fixes to Compiler Builtins
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
diff --git a/clang/lib/Sema/SemaTemplateInstantiateDecl.cpp b/clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
index 28925cca8f956..439a5317f06f1 100644
--- a/clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
+++ b/clang/lib/Sema/SemaTemplateInstantiateDecl.cpp
@@ -7061,8 +7061,15 @@ NamedDecl *Sema::FindInstantiatedDecl(SourceLocation Loc, NamedDecl *D,
     // anonymous unions in class templates).
   }
 
-  if (!ParentDependsOnArgs)
+  if (!ParentDependsOnArgs) {
+    if (auto Found =
+            CurrentInstantiationScope
+                ? CurrentInstantiationScope->getInstantiationOfIfExists(D)
+                : nullptr) {
+      return cast<NamedDecl>(Found->dyn_cast<Decl *>());
+    }
     return D;
+  }
 
   ParentDC = FindInstantiatedContext(Loc, ParentDC, TemplateArgs);
   if (!ParentDC)
diff --git a/clang/test/SemaCXX/lambda-unevaluated.cpp b/clang/test/SemaCXX/lambda-unevaluated.cpp
index 9289fc9ec1243..4b0e1abdb38f0 100644
--- a/clang/test/SemaCXX/lambda-unevaluated.cpp
+++ b/clang/test/SemaCXX/lambda-unevaluated.cpp
@@ -282,3 +282,22 @@ static_assert(__is_same_as(int, helper<int>));
 
 
 } // namespace GH138018
+
+namespace GH163837 {
+
+template<int N>
+void f();
+
+template<class>
+struct X {
+    using type = decltype([](auto) {
+        f<[]{
+            int result = 0;
+            return result;
+        }()>();
+    }(0));
+};
+
+X<void> l;
+
+} // namespace GH163837